Nonprofit Board Governance

The topic of nonprofit Board governance can be confusing,
mostly because this important concept may not be fully understood. In general,
governance brings together policies, systems and structures that provide
support to Board members in making good decisions for the nonprofit according
to expectations of the public trust.

Right there, you see that the topic can get confusing. It
might help to know that governing a nonprofit is different from governing a
for-profit organization. Nonprofits serve a public purpose without benefiting
any particular individual. Therefore, the basic goal in governance for
nonprofits focuses on protecting and furthering the mission of the nonprofit.
However, the goal of a for-profit company is to generate income for the
company, employee and shareholders.

Nonprofit boards are considered “Stewards of the Public
Trust”, which signifies the general public trusts that a nonprofit is
fulfilling its mission as stated to the IRS when it was granted exemption
status as a nonprofit organization. The Board has three primary responsibilities:
Duty of
Care, Duty of Loyalty, and Duty of Obedience.

Duty of
Care means the Board will make decisions with the same
level of care as each member would for their own personal assets (even though
board members have no personal assets in the nonprofit).

Duty of
Loyalty means the Board puts the needs of the organization
and the population that it serves above all other needs, especially the
individual’s or group’s personal agenda.

Duty of
Obedience means the Board will maintain compliance with all
legal standards and regulations required for the exempt organization, including
annual filings with state and federal agencies.

A 2017 study on Boards of Directors showed that 56 percent
of nonprofit Boards struggle with weak Board governance. As a result,
approximately 52 percent of nonprofits are unable to expand their impact
because of a weakness in strategic thinking such as developing a mission,
strategy, impact evaluation, or insight by their Board.

What should be noted, however, is that these limitations
are most likely not the fault of the Board members. Instead it’s more a matter
of “you don’t know what you don’t know!” Without a doubt, those serving on a
nonprofit Board have every intention of doing the right thing, making the right
decisions, and being a good steward of the organization. But like coming into anything
for the first time, Board members need to learn how to effectively govern a
nonprofit and serve as a productive Board member. That takes information,
training and dedication.

Spokes is always here to assist nonprofit Boards with the
development of policies and procedures as well as providing an understanding of
the legal and ethical responsibilities of the Board. Visit our website at https://www.spokesfornonprofits.org/services/just-for-board-members/
to learn more about the resources we have available to provide local nonprofit
Boards with the management training, consulting and resources they need to better
serve our community.

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